America's Rental Market: Regions with Climbing and Falling Rents

Discover the latest data on rental market trends in America, including regions where rents are on the rise and where they are falling.

After a prolonged period of decline, rents are beginning to inch back up. According to Redfin, the median asking rent increased by 0.8% in May compared to a year ago, reaching $1,653. This marks the highest level since October 2022 and the second consecutive monthly increase. The recent surge in multifamily construction had caused rents to drop, but with a backlog of apartment buildings still in progress, prices are not expected to skyrocket, as noted by Redfin. While this may not be favorable news for investors, it does benefit individuals in need of rental housing.

Young renters, in particular, continue to drive demand as many opt to stay put rather than face the challenges of the increasingly unaffordable homebuying market. Despite this, rent price growth has been relatively restrained due to the sufficient supply of new apartments meeting demand, even during the peak rental season. This recent uptick pales in comparison to the 17.5% year-over-year increase seen at one point during the pandemic.

Although rents had been on a downward trend prior to the recent uptick, the median asking rent is still just under $50 below the record high set in August 2022. Even with the slower pace of increase, rents remain high. For instance, to afford rent without being considered rent-burdened (spending more than 30% of income on rent), one would need to earn nearly $80,000 annually, compared to less than $60,000 five years ago, according to Zillow.

The America’s rental market presents a stark contrast, with some areas experiencing rent hikes while others see declines. Washington, D.C., saw the largest increase in median asking rent at 11.1% year-over-year, followed by Cincinnati, Chicago, Virginia Beach, and Minneapolis. Conversely, cities in the Sunbelt and other metropolitan areas witnessed declines, with Jacksonville, San Diego, Austin, Seattle, and Phoenix experiencing the most significant drops.

The Sunbelt's oversupply of apartments, fueled by the influx of pandemic migrants, has contributed to falling rents in the region. However, with the pandemic housing boom fading and vacancies rising, property owners are facing cooling rents. While some industry experts believe this trend is temporary due to the recent construction boom, the future trajectory of rents remains uncertain. It is speculated that rents may rise again in the next two years unless a major recession occurs, as the increase in apartment construction may not be sufficient to offset the surplus of homes.

The America’s rental market is a complex landscape with varying dynamics across different regions. While some areas are experiencing rent increases, others are witnessing declines, reflecting the ongoing shifts in supply and demand. The future direction of rents will depend on a multitude of factors, including economic conditions and construction activity.